Wheat Market Outlook and Prices

The Wheat Market Outlook is provided by Mercantile Consulting Venture Inc.

Wheat Market Outlook Audio Summary

Marlene Boersch, Anthony Temple and Michael Wilton of Mercantile Consulting Venture Ltd. provide a weekly overview of the wheat market outlook. Below is an audio summary which is updated every week along with the written report.

Click the links below to go directly to that section.

• Global Wheat Production and Trade

• Significant Purchases/Trades

• Significant Events

• Outlook

• Primary Elevator Price Tables and Grade Spreads

Wheat Market Outlook - April 22, 2024 

USDA Grain: World Markets and Trade

• The IGC decreased its estimate for 2024/2025 global wheat production by 1.1 million mt in it’s March Grain Market Report (GMR). At 797.7 million mt, global wheat production is expected to grow by 1.1 per cent year-over-year.

• The IGC reduced production in the EU by 1.8 million mt to 128.7 million mt. Larger crops are being anticipated in the U.S. (up 1.2 million from last month) and China (up 0.5 million mt from last month).

• The ICG decreased 2023/2024 ending stocks by 3.6 million mt. Coupled with lower production, global wheat supply in 2024/2025 was lowered by 4.7 million mt from last month to 1,061 million mt.

• Global wheat use was decreased by 1.3 million mt largely due to a 900k mt decrease in global feed use.

• The IGC expects that 2024/2025 ending stocks will shrink by an additional 3.4 million mt to 259.0 million mt, down two per cent (4.9 million mt) from the 2023/2024 season.

Global Cash Wheat:

• Global cash wheat prices were mixed last week. Prices in the EU were generally higher, while the Black Sea was slightly lower. North American values continued to slide las week.

Global wheat production and trade

There is a lot of competition in the wheat markets as wheat is produced around the world. Below is a brief synopsis of last week’s market events in the major wheat origins.

Futures:

• May 2024 contract Chicago winter wheat closed at $550-2, up 13-4 cents on Friday, down 5-6 cents on the week.

• May 2024 contract Kansas hard red winter wheat closed at $581-4, up 4-2 cents on Friday, down 8-2 cent on the week.

• May 2024 Minneapolis hard red spring wheat closed at $647-0, up 8-2 cents on Friday, up 4-2 cents on the week.

• U.S. wheat futures are currently trading 3-9 cents higher at the time of writing this Monday morning.

Canadian Wheat:

• Agriculture and Agri-Food Canada (AAFC) made no changes to wheat in Friday’s outlook for Principal field crops. AAFC left its old crop export estimate unchanged at 20.25 million mt, which reflects a two per cent decrease from last year. This is too low.

• Canadian weekly exports: Week 37 wheat exports were very strong again at 514.6k mt. Year-to-date exports are now 15.3 million mt which is seven per cent ahead of last year. The current export pace annualizes to a total of 21.5 million mt which would be four per cent more than last year.

Durum:

• AAFC made no changes in its durum balance sheet.

• Tunisia bought 25k mt of durum wheat at $376.49 C&F. This is $7.40/mt less than Tunisia’s last purchase on Apr. 5, 2024. It does not look like the traded durum was Canadian, however, the lower Canadian dollar means that the price calculates to about CA$10.30/bu at the elevator in Saskatchewan. This is approximately CA$0.10/bu less than the average price of Tunisia’s last purchase. There was talk that this purchase was to replace a rejected cargo of what was likely Turkish durum.

• Although the price of Tunisia’s tender was lower, price indications in the EU have risen over the past couple of weeks. Prices in France and Italy were said to have risen by 3-5 euros/mt over the week.

• We saw some durum “specials” in southern Saskatchewan last week as some elevator companies are putting together programs to ship through Thunder Bay.

• Canadian durum exports were strong in week 37 as Canada shipped 115.7k mt of durum. Most of the vessel exports were from the St. Lawrence which shipped 90.9k mt of the weekly volume. Year-to-date durum exports are now 34 per cent behind last year’s volume at 1.5 million mt but remain on pace to meet the AAFC’s 3.2 million mt export number.

EU Durum:

• Durum wheat production in the EU is expected to fall by five per cent from last year to 6.7 million mt. If true, this would be the lowest volume since records began.

• The recent rise in prices is a good opportunity to finish old crop sales it not already done. We are sold out of old crop durum, and 30 per cent sold new crop durum.

U.S. Wheat:

• Moisture conditions are rapidly deteriorating in the U.S. winter wheat belt due to a lack of rain and strong winds. Twenty-four percent of the U.S. winter wheat crop is under drought conditions, compared to 18 per cent last week. Sixty-five percent of the Kansas winter wheat crop is under drought.

• The condition of the U.S. winter wheat crop declined by one per cent last week to 55 per cent Gd/Ex. Condition ratings in the top producing state, Kansas, were down six per cent to 43 per cent Gd/Ex. Conditions in the neighbouring state, Oklahoma, were down eight points to 60 per cent Gd/Ex.

• U.S. wheat sales were net -94k mt, given two recent cargo cancellations by China. This was still within the trade expectations. Total sales are now 18.7 million mt which is one per cent above last year compared to the USDA’s estimate for a 4.5 per cent decrease. Having cancelled 123.7k mt worth of sales last week, China still has 303.0k mt worth of unshipped wheat on the books.

• U.S. HRS for May 2024 was valued at $279.00mt FOB PNW (down $3.00/mt from last week), FOB Gulf HRW 11/12.5 pro is valued at $264.00/mt (down $9.00/mt from last week).

Australian Wheat:

• Australian futures rose to an eight-week high. Western Australia remains dry, and farmers are not selling.

• FOB values in Australia: May 2024 APW, WA is valued at $250.00/mt (unchanged from last week).

Argentine Wheat:

• BAGE says that seeding conditions in Argentina are strong, but forecasts that seeded area will be 6-7 per cent lower than last year.

• The USDA Attache’ in Argentina is forecasting that wheat production there will grow by 1.1 million mt (seven per cent) from the previous season to 16.8 million mt. The increase in production is expected to come entirely from better yields as harvested area is forecast to be 100k ha lower. Low beginning stocks means that total supply will be slightly (300k mt) lower than the previous year at 18.6 million mt. A slight (200k mt) decrease in exports to 10.0 million mt and robust domestic consumption is expected to keep use steady. Ending stocks are expected to continue to decline to by another 300k mt (two per cent) from last year to 18.6 million mt.

• FOB Argentine wheat (12 per cent pro) for May 2024 was quoted at $219.00/mt (unchanged from last week).

EU Wheat:

• The USDA Attache’ in the EU is estimating that total wheat production in the member states in the upcoming (2024/2025) year will be down four per cent from last year on a combination of less seeded area and smaller yields. Excess moisture in Western Europe (especially France) and dryness in eastern Romania and Bulgaria delayed seeding operations and impacted crop growth. The Attache’ is estimating that old crop ending stocks will be 17.5 million mt compared to the official USDA estimate of 16.7 million mt. This is still well below the EU Commission’s estimate of 21.1 million mt. Larger stocks, but less production and imports mean that total supply in 2024/2025 is expected to fall by four per cent from last year to 156.4 million mt. Fewer exports, but larger domestic use means total consumption will grow slightly (one per cent) to 112.0 million mt as ending stocks fall 20 per cent to 14.1 million mt.

• Winter wheat crop ratings in France fell by another one per cent to 64 per cent Gd/Ex. This compares with 94 per cent Gd/Ex this time last year.

• EU FOB prices: May 2024 French 11 pro wheat closed at $221.00/mt (up $4.00/mt from last week); May 2024 German 12.5 pro wheat closed at $233.00 (up $1.00/mt from last week); May 2024 Baltic 12.5 pro wheat closed at $222.00/mt (up $1.00/mt from last week).

Black Sea Wheat:

• Dryness in Russia’s southern region is becoming a concern. This area accounts for roughly 31 per cent of the country's winter wheat crop.

• Despite a major freight disadvantage, Ukraine won the GASC tender because of Russia’s $235/mt floor price.

• We have Russian FOB values for 12.5 per cent protein wheat for May 2024 at $210.00/mt (down $2.00/mt from last week).

Significant purchases/ trades:  

• Ukraine sold Egypt (GASC) at $220 basis 270-day L/C (around $200 basis cash).

• Tunisia bought one 25k mt cargo of durum. We expect most users are covered on old crop.

• U.S. wheat sales were net reductions of 94k mt, given two recent cargo cancellations by China. This was still within the trade expectations. Total sales are now 18.7 million mt which is one per cent above last year.

Significant events over the past week

• The International Grains Council decreased its estimate for total grain production in 2024/2025 by 10 million mt. The global grain crop is now expected to be 2.322 billion mt which would still be a record volume. The decrease in production was driven by a seven million mt reduction in corn production. Argentina’s corn crop is suffering from inclement weather and corn stunt disease.

• Tensions in the Middle East supported energy markets last week, but some of this also trickled into grain.

• Russia launched additional attacks on Ukraine’s port city of Odessa. Some port infrastructure was damaged, it is hard to tell what the impact will be.

• The U.S. dollar index rose to 106.1 which weighed on U.S. prices. 

Mercantile’s Outlook This Week:

Mercantile says geopolitical tensions are causing additional uncertainty in the commodity markets. There is currently a standoff between the fund short and farmer holding. - Mercantile would use this rally to finish old crop wheat sales but would not sell any new crop for now.

Canadian Primary Elevator Bids

Grade Spreads in Canadian Dollars

Relevant FOB Prices and Calculated Basis

CLICK HERE to learn what the basis is and why it is important (FOB Wheat Prices and Export Basis Calculation PDF).

For the archived wheat market outlook and price reports, please CLICK HERE.